Best Tips on How To Calculate Car Insurance

How are car insurance rates calculated - 4993992

Owning a car brings many expenses with it. Apart from getting gas, fixing whatever breaks, there is also insurance that you must pay. There is mandatory insurance, which is generally Third-Party Liability Coverage, and there are other optional types.

We are going to explain why these types of coverage are important when calculating insurance rates. Furthermore, several other factors can affect the price you are paying. We are going to mention these and help you figure out how to calculate your insurance on your own! is a place to go if you want to learn more about insurance or get the best quotes in Canada!

What are Insurance Rates?

According to the IRMI glossary, rates are units of cost multiplied by units of exposure, and once they are calculated, we can determine the insurance premium.

Rates are supposed to cover any losses, costs, and the insurance company makes a profit off of them.

Insurance rates can be affected by several factors. The main ones are the following:

How Can I Lower My Insurance Rates?

Once we have established what affects insurance rates, we also need to mention that there are ways to reduce your premium. Different discounts and other forms of saving money will be considered when calculating your insurance.

Therefore, we will present you with two ways, but keep in mind that there are many more:

● Keep yourself informed:

Make sure that you research all insurance companies in your area. Compare their rates and carefully check which option is the best for you. If you find this too tedious, you can always hire an insurance specialist like Surex to do the work for you.

● Do not get a fast car:

If you do not need a fast car, and your vehicle serves to get you places, get a less expensive car with less horsepower. The more horsepower, the faster you go. This means that you have more chances of getting into accidents.

People who drive regular cars are less likely to be speeding, which is what the insurance companies consider when calculating insurance rates.

How to Calculate Insurance?

So far, we have explained what insurance rates are, what affects them, and how to lower them. Now, we are going to explain how to calculate your insurance premium with the help of the information presented above.

Mandatory insurance coverage is the first thing that is considered when calculating. Drivers must be aware of the other parties, especially if they are at fault. Therefore, third-person liability is a must!

Added to this is the additional coverage you might choose to protect yourself. These are different types of coverage, such as collision or comprehensive. This is called Own Damage (OD) Cover, which is calculated as a percentage of Insurance Declared Value (IDV).

Insurance Declared Value is the amount of money determined by the insurance company that they are willing to pay in case of any damages or accidents. Logically, the more money they are willing to give, the higher your IDV is. The higher your IDV is, the higher the premium will be.

IDV involves the following:

Showroom price of your vehicle + accessories – depreciation value of the vehicle.

Furthermore, once IDV is calculated, we can calculate OD:

OD = IDV x Insurance Rate + any additional bonuses – discounts.

For example, we could say that your rates are $100 per $10000. Your IDV might be $5000. Let’s say you got a claims-free discount of 10%. The calculation is the following:

$5000 x $100 – 10% = $50000 – 10% = $5000 per year.

Of course, these numbers are made up, and the calculation is simplified. The point is that you see that it is simple maths.

As you can tell there are many factors that insurance companies include in the calculation. It might seem confusing, but once you get a grasp of it, you will see that it is not that difficult.

Insurance companies might have different terms and conditions for various reasons, but your insurance company must declare the price of your premium at the very beginning.

Regardless, if you think all of this is overwhelming, read the following section to learn how to make the process easier!

What Else Can I Do?

It is of great importance that you know you can hire someone to do the work for you if you find everything too confusing.

You will have to enter your data, such as your name, where you reside, e-mail, and phone number.

Further, you will have to follow three simple steps to get your insurance:

  • Enter your driver’s history and details about the vehicles
  • Compare quotes
  • Choose an insurance company based on the information presented.

Can I Get Scammed?

It does not matter whether you chose an insurance company on your own or you hired help. When you know enough about calculating the premium you have nothing to worry about!

The insurance companies generally have no desire to trick you because they have a reputation to keep. You can easily get access to reviews and comments, which can help you see whether a company is legitimate or not.

Further, your insurance broker has your best interest at heart because their job is to help you.

You have to be cautious, but if you are well-informed, you are going to be fine!


In conclusion, calculating insurance premiums seems to be complicated, but in reality, it is not. You have to know some basics and what factors are relevant. Given what we’ve presented you in the above article, you should be able to get your head around calculating insurance premiums. You can also get a broker to help you with this.

Make sure to stay informed!

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